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So Much Ado About Bitcoin ETF Approval

It is being said here and there: the awaited Exchange Traded Fund (ETF) could be approved by the U.S. Securities and Exchange Commission (SEC). Though there is no firm basis to this optimism, the excitement surrounding the purported approval is being credited for catalysing the price of Bitcoin to another height in the past few days.

Last week, it took Bitcoin less than half an hour for its price to go from $6,500 to $7,400. It has since grown by 5%. If the market trend and the excitement continue even as the estimated SEC decision date gets closer – earliest August 10 – the next three weeks could see the price climbing to about $8,800 (that is adding roughly $1150). The gain could be higher than the estimated 15% if there is a credible reason to believe that the SEC would give the green light or if the US president’s escalation of his country’s trade wars results in greater chaos.

China is still on the verge of internationalizing the use of yuan for global trades. No other major economy has followed suit though anti-US dollar memes have been spreading – like BTCC’s Bobby Lee urging Iranian President Rouhani to stop using the US dollar if he really wants to threaten President Trump. There is no reason yet to think that the demand for the dollar could decrease. Should that happen, depending on the magnitude, the dollar could hyperinflate. However, Brookings Institute suggests that the internationlization of the yuan which has started over a decade ago after the financial crisis with the then PBoC governor, Zhou Xiaochuan, is not likely to work until the currency is made attractive for payments.

Similar to an open cryptocurrency exchange, the ETF will have locked and insured features just like it is with security which gives users more protection. An approved Bitcoin ETF would enable more people be able to buy the cryptocurrency without exchanges. It will also boost public trust. This reposed trust in the structure could see Bitcoin’s price spike to its previous all time high or close.

According to a Sabo Group analysis that is premised on an estimate by blockchain forensics firm Chainalysis, about $30bn worth of Bitcoin changed hands from long-term investors to speculators from December 2017 (after the bubble) to April 2018. Half of this amount was reportedly exchanged in December 2017 alone. The analyst, Jacob Pouncey, notes two takeaways from the Chainalysis blog:

“(1) the amount of Bitcoin held for transactions and speculation are now equal to coins held for investments, and (2) the new speculators could be depressing the price of Bitcoin as the available supply for trading increased by 57% since December thereby dramatically increasing supply while demand and trading volume decreased over the same period.”

As if alluding to the high confidence of a positive SEC verdict that is already permeating the industry, the analyst also notes two developments that can help the progress of the proposed crypto ETF. They are the recent SEC Chairman’s statement that Ethereum and Bitcoin are not securities and the SEC’s new rule that makes the process of bringing simple ETFs to market. He adds that positive price catalysts for Bitcoin include the ETF announcement which could boost its price, the effect of global recession and a continued bear crypto market that could make investors run to Bitcoin as a safe haven.